What is a PEO (Professional employer organization)? A PEO becomes the employer of record for tax purposes by means of a co-employment contract. All of the paper work concerning the employees is filed under the identification numbers of the PEO as opposed to being filed under the client company's identification numbers. The client company directs all of the day-to-day activities of the employee while the PEO provides functions like payroll for a fee. The fee will normally run between 3 and 15% of the total payroll as well as the employer's share of FICA,
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In essence the PEO company takes over all the human resources operations for a company. One of the benefits is that the PEO might be able to get lower costs for things such as workman's compensation insurance and company employee benefits packages because with managing multiple company's HR, they are able to apply for the discounted rate because they are the employer of record for a much larger group of employees.
What makes a PEO differ from a ASO? The main difference between a PEO and
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An ASO is a company that provides all or most of the human resources operations for the client company, however the company lists all of the employees under their own EIN and not that of the ASO's. Providing the administrative functions for the human resources department can relieve the company of the many headaches which they might not be prepared to deal with, and so an ASO can be an answer to providing those services with the aid of another contracted company.
Just what responsibilities does a PEO assume for a company? The PEO provides a wide range of management responsibilities using their team. The PEO provides improved employment practices and risk management, which will reduces liabilities. They are able to assist a company to help increase productivity and profitability. This gives a company a rest from the load of employment paperwork. A PEO will provide a company entry to a complete benefits package,
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Without having to keep up a human resources department a company can actually increase their profitability and productivity. From a paperwork point of view the company can have no employees of their very own and therefore less liability. They could still deduct the cost of labor because they are the co-employers of the employees which they pay the PEO company to provide.
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Which is the better choice PEO or ASO, and why? There are a lot of things to consider when making a choice between the services of a PEO and an ASO. For instance you might want to keep all of your employees under your business license while having the major portion of your human resources handled by a separate company. This usually happens when a company moves from a small to a medium size company. By keeping administrative functions of your human resources operating at another location you can get by with having just only one HR person on site as a liaison with your ASO.
When you keep growing into a much larger company, it could provide lots of benefits to allow your employees be filed under the licenses of a PEO company while they staff your on-site human resources. Having your employees listed under the PEO's licenses you are relieved from a good deal of liability while maintaining a great staff and having all the challenges of maintaining all the aspects of human resources handled by a PEO company. Each senior executive of a company will
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ProHR is one of many peo companies, however proHR provides top quality service. Visit prohr.com for more information.
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